Banking for businesses (of all sizes and industries) is still an open field in the financial services industry.

Financial institutions provide general deposit accounts and features, but lack customization in terms of cash flow management, spend insights, or tailored credit products. Companies with less than 2 years of trajectory (or minimal gross revenue) may not qualify for traditional banking.

Fintech companies have developed niches that solve for one particular painpoint, but lack comprehensive coverage. There’s no clear leader in the space for small & medium-sized businesses (SMBs) and enterprises.

Enter Ramp — a spend management fintech for US companies, which has evolved beyond spend management to offer multiple products & services for organizations in any vertical. Here’s a deep dive on Ramp (TL;DR) —>

• The SMB challenge facing platforms that serve business clients;

• How Ramp initially started;

• Product history and reputation for quality execution;

• Monetization for Ramp;

• Customer target & growth in this sector;

• Ramp becoming an industry leader;

THE SMB CHALLENGE

Before we dive into Ramp, let’s provide context on the struggles facing businesses — especially in this current environment.

Each company has a unique set of expense flows throughout a given month, which can come from different departments and cover various costs. For the team (and executives supervising this team), there’s a manual, tedious process to chase down all company expenses (by end of month). Just software subscriptions add up to $300K+ in annual spend.

As a company starts to scale towards enterprise status, the volume of transaction activity increases exponentially — so does the processing time. There’s no clear solution for expense management through a unified, all-in-one platform.

Businesses are now more comfortable in managing finances with technology, but this still requires multiple vendors (and accounts) being utilized to aggregate an all-inclusive view of company expenses.

ORIGIN STORY FOR RAMP

The company was founded four years ago (2019) by Eric Glyman (CEO), Karim Atiyeh (CTO), and Gene Lee.

Glyman and Atiyeh actually launched a company jointly (prior to Ramp) in 2014 called Paribus. The startup focused on tracking pricing for consumers and helping utilize discounts for purchases that they may not have known about. Any post-purchase refunds would be automatic for the user.

Capital One’s credit card team showed a high-level of interest in Paribus and decided to purchase in 2016 (months after finishing Y-Combinator) — having acquired more than 500K users who saved $100M+. Gene Lee (software engineer) connected with Glyman and Atiyeh during the company’s tenure at Captial One.

The founders of Paribus made the move in March 2019 to start something new (Ramp) based on a premise of a spend card with business savings in mind. As they both explored this further, it was apparent that the real struggle facing business owners came down to expense processes requiring so much time (and money).

Since the company started, its founders prioritized their entire team being bought in to Ramp’s unique culture of building the next generation of founders. The company was a magnet early on for top exec talent and new-to-industry graduates. Many early employees have gone into their own ventures with full support from Ramp’s founders.

PRODUCT EXECUTION

For businesses (of any size or industry), not all of their monthly transactions go through a card.

For a provider to go deep into analytics and deliver custom insights, a holistic picture is needed. In Ramp’s quest to become a powerhouse for companies, every transaction can be a indicator for potential savings & proper budgeting.

The journey did start with corporate cards, but has evolved towards a broad approach of expense automation and management. Ultimately, Ramp is hyper-focused on delivering products, features, and functions that save on costs and capacity. The fintech already has an industry reputation as a leader in product velocity and high user engagement.

Corporate Cards

Ramp’s initial product was a basic corporate card with 1.5% unlimited cash back across all purchase categories. Companies can set up specific controls & restrictions based on amount and merchant type. Software was the key feature as business users can get granular on what & when a card transaction should be authorized. An immediate savings (in time & money) came through as unauthorized transactions were now blocked right away.

Fast forward to today: Ramp now offers a Ramp Commercial Card and Ramp Corporate Card — both with Visa, but different issuing banks (Sutton Bank and Celtic Bank, respectively).

Expense Management Software

This expense management software was accessible for companies in an all-in-one dashboard. Reviewing transactions, adjusting card controls, issuing/blocking individuals cards, etc. could all be fulfilled through Ramp’s user-friendly platform.

This included the ability to match receipts to expenses at time of transaction. No need to save or store paper receipts for an end-of-month reconciliation. Cardholders receive a prompt immediately to report a transaction via an app. Ramp built a high-quality optical character recognition (OCR) tool for capturing info from receipts in this app.

Over time, the fintech was able to incorporate custom policies and rules of their business clients. Travel is a key consideration for companies and can become a headache for employees making accommodations monthly. Ramp empowered cardholders to make purchases through any company AND according to their employer’s travel policies. Approvals and budget allocation was now simplified even further for a business and its staff.

The result is that business clients finish their expense management processes in hours instead of weeks. Additionally, integrations with accounting and ERP companies (such as Quickbooks, Netsuite, Sage) boost efficiency even further. Ramp estimates that their platform saves up to 5 days of staffing capacity monthly and $100K annually.

Payments (Bill Pay, Cross-Border, Domestic)

In expanding off of card-based spend, Ramp added its Bill Pay product (in October 2021) as a way to capture the majority of other expenses. Business clients still used manual, one-off accounts payable processes to pay vendors on a monthly basis — some including paper checks.

Invoicing was missing for Ramp’s Bill Pay to become truly compelling. Accounting teams receive the invoice through Ramp, start the bill payment flow, and choose how & when to pay.

About year later (August 2022), Ramp gave its clients the ability to pay bills up to 90 days out. Through Ramp Flex, the startup covers a bill upfront and allows their client to choose the term for repayment. This provided cash flow flexibility for companies to manage their daily operating funds more effectively.

Extending its scope of payments, Ramp enabled international payments in 175+ countries and 80+ currencies two months later (October 2022). Same-day ACH was announced in May 2023 for a $10 fee.

New Release: Ramp Plus

Earlier this month, the launch of Ramp Plus was made to further enhance its ‘one-stop-shop’ platform. As an opt-in paid plan (free for 12 months to existing clients), the new program will offer:

• Procure-to-pay: automated procurement solution so companies can manage all requests in one area, including approvals to respective departments;

• Global expenses: broader support by currency type and tax reporting system in the UK and EU;

• Workflow builder: custom, automated workflows for onboarding and payment approvals;

• ‘Smart policy’ enforcement: features that programmatically support rules in place by companies, such as auto-lock on cards for out-of-policy transaction requests;

REVENUE STREAMS

Interchange revenue from card spend is a common revenue driver for programs with debit, credit, or corporate cards. This is essentially a cut of the fee a merchant pays to the card networks (such as Visa, Mastercard) and bank for facilitating a customer purchase. Depending on the transaction category, these fees can range between 1% - 3% of the purchase amount. A merchant receives the net amount for a sale.

However, this amount can fluctuate from month-to-month based on transaction volume. As a sector gets saturated with competitor card programs, interchange revenue typically starts to trend down.

For Ramp, its corporate card was a product that connected with its software platform. The startup’s ability to anchor client relationships through its software funneled more card spend. Other expense management firms charge a fixed fee as part of their revenue model, but Ramp kept this free.

Besides interchange, Ramp can also take a markup on facilitating payments (such as Bill Pay, ACH, cross-border transfers) and its Flex product.

TARGET CUSTOMER & MARKET GROWTH

Initially targeting SMBs, Ramp has expanded to serve companies of all sizes and industries — retail, medical, travel, eCommerce, logistics, hospitality, consulting, agriculture, and others. The move upstream towards enterprise-sized companies wasn’t as heavy a lift since its platform was built to handle scale and complexity from the start.

Since the startup’s product suite can be utilized a-la-carte or as a bundle, even solopreneurs (aka 1-person, small businesses) can work with Ramp for payment processing only. The integrations with established accounting brands also made it easy for growing SMBs to add other products as they start to scale.

For Ramp’s own growth, the platform was valued at $8B in March 2022 after its Series C fund raise of $200M. At that time, the company was estimated to have 5K business clients processing over $5B in payments annually. This year, Ramp reported an annual recurring revenue of $100M (Q1 2023) fueled by its corporate card & bill pay product (across a customer base of 15K).

As its clients face an uncertain economic climate with inflation, Ramp helps provide a clear direction on expenses, budgeting, and insights that can help save money in the near-term.

RAMP IS emerging as an industry LEADER

Despite the struggles across the industry (from startups to enterprises such as Stripe & Adyen), Ramp’s consistent growth and trajectory has the company in a class of its own.

Beyond spend management, Ramp touches multiple areas that businesses see as painpoints — accounts payable, expense approvals, payment processing, and working capital. The alternative to Ramp would be a client signing up with 4+ vendors and managing multiple logins. It’d a difficult proposition for other fintechs or financial institutions to replicate. For established corporate card providers (such as AMEX), there’s a product experience gap that will take time for them to fill.

Is there still room for Ramp to improve even further? Yes.

There’s still an opening to push further on automation, which can benefit businesses with more cost savings. Capturing the majority of expenses (across various departments & accounts) at a company, delivering reconciliation reports at end of month, and providing insights into where reductions in spend can be made. No easy feat for any company, but Ramp is closing in quickly.

Artificial intelligence (AI) gets tossed around often these days, but for such a data-heavyweight like Ramp there’s a compelling path forward. Comparing customer data to market data on software expenses can lead to indications that a business client is overpaying — Ramp can then suggest lower-cost options. Similar to vendors that negotiate fees down on behalf of clients (and only charge their own fee as a portion of the savings), Ramp can do the same in payroll, equipment, travel, insurance, and other recurring purchases.

Lastly, Ramp does a great job in payouts but lacks capabilities with ‘pay-'in’ — specifically invoicing. Being able to send a payment request simply (through an email with a link) and receive a deposit would cover the other side for financing teams (aka accounts receivable).

Any potential blockers for Ramp? Also, yes.

The startup is in a complex space with heavy with regulation and reporting concerns. Businesses using Ramp for the majority of accounting functions must have a high-degree of trust. Any discrepancy with end of year audits or tax filing can lead to a loss of this trust.

Within an organization, different stakeholders have different priorities. Speed up monthly expense activities, boost rewards earned, and having direct control of approvals can be separate goals within one company. Ramp’s vision focused on cost & time savings, but as an organization matures it becomes challenging to satisfy all areas with a single, blanket approach.

Besides trust and managing client priorities, there’s a potential blocker with messaging on value. With so many products, features, and functions as Ramp’s differentiation in the market, prospective customers can struggle to understand what they’re buying. A better user experience that minimizes spend and takes on more aspects of managing a company expenses is a loaded value proposition that can be difficult to market & sell.

the future is embedded finance

To sum this deep dive succinctly, Ramp is winning & growing in a difficult market by successfully owning more of the challenges its business clients are facing.

The platform is doing so by embedding more solutions into its platform that are adjacent to its core competency. Ramp is categorized in the bucket of expense management, which at the bare minimum is providing an organized view of a company’s transactions. However, Ramp’s north star of savings and efficiency spilled over to card spend, accounting, payments, and expense optimization.

There are very few fintechs that have successfully evolved to a multi-product, multi-user type approach in so little time (about 3-4 years).

Even though embedded finance is often associated with non-financial companies (such as retailers, medical, telecom firms) adding banking products, Ramp has brought financial services to these non-banking verticals at a higher velocity and adoption rate.

If anything, Ramp’s success is a sign that through the right conduit (or provider) more companies can take advantage of sophisticated financial programs and even pass them on to their own end-users.

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